Disc Dem

Saturday, 20 May 2017

Time for Work

In my last post I promised to
share some ideas on how the plight of the unemployed might be addressed,
emphasising that education and skills training can play a vital role in easing
this rapidly escalating problem.The
urgency of our need to find solutions cannot be overstated, particularly in
light of the recent explosion in violence against women. Read any report on the
issue of gender based violence perpetrated by men and you will find low
self-esteem, caused by lack of education or low income, features among the
primary causes. There are, of course, other social factors that contribute to our
particular problem, but addressing the self-esteem issue by offering higher
earnings potential through improved access to education will be a big step
forward.

So where has it all gone wrong?
After an initial obvious conclusion that the ANC have allowed SADTU to
systematically reduce South African basic
education to farcical levels of incompetence and ineptitude, it would seem there
are other insurmountable obstacles awaiting those who manage to overcome this
educational deficiency. Why, after making it this far, do so many students not take
advantage of more advanced educational opportunities? There are Universities, Technical
and Vocational Education and Training (TVET) Colleges, and also industry-based
opportunities facilitated by Sector Education and Training Authorities (SETA’s),
yet the numbers of unqualified and unemployable people keeps growing. It
appears that all the fancy names in the world cannot overcome the fundamental handbrake
to progress - money, or rather the apparent lack of it.

You are all well-enough acquainted
with the financial issues facing university students emanating from 2016
#FeesMustFall movement, but are you as acutely aware of the costs students have
to bear to attend TVET Colleges? While less than university fees, costs for
TVET courses are still high enough to exclude many otherwise deserving
students. This keeps us on track to substantiate the next “obvious” conclusion:
that a lack of sufficient funding is the main exclusionary factor for many
people who simply cannot afford to further their academic education or practical
skills training.

SETA’s, though, function quite differently and are the exception that proves the rule - but perhaps not in a way you might
think. Operationally, the South African Revenue Service (SARS) conveniently collects
a 1% Skills Development Levy (SDL) from employers based on the total amount
paid in salaries to employees (including overtime payments, leave pay, bonuses,
commissions and lump sum payments). These levies are then distributed to the various
Sector Authorities, who are tasked with allocating education and training
grants to qualifying businesses within their predefined business sectors. There
are 21 such Authorities, starting with the Agricultural SETA, and ending with
the Wholesale & Retail SETA. Of these,
2 (Culture/Arts/Tourism/Hospitality & Sports, and scarily, Safety &
Security) were so dysfunctional they were under administration for the 2015/16
financial year. Of the remaining 19, 3 received qualified audit opinions, and a
further 11 had material misstatements in their performance reports. Excluding the
2 under administration, the other 19 each had its own Board of Directors, with
its own Executive Management team, and a variety of other operational
duplications costing over R1.63 billion.

Apart from lifting the lid on a
ridiculous structure that requires over 300 Board Members, multiple CEO’s,
CFO’s and COO’s to provide what should be a nationally integrated education and
training solution, the really
interesting outcome of my basic research is bottom-line SETA economics.

If the amount of R14.1 billion
doesn’t immediately grab your attention, then let me throw in another R13.85 billion. The first amount of R14.1 billion is the combined annual revenue
of 21 SETA’s for the 2015/16 financial year.The second amount of R13.85 billion
represents their combined reserves – in other words, money they have accumulated
but not spent. Their only
mission-critical task is to promote and nurture education and skills
development, so why have they failed to spend all of the money allocated to
them? The short answer is that a combination of over-regulation of labour
markets, coupled with a distressed economy, has served to deter corporate
investment in employee recruitment and training. As a result, ever diminishing
numbers of grant applications were received from businesses where the costs
associated with employee recruitment and training exceeded the value of the
applicable grant. Whatever the reasons,
the facts remain that these Sector Education and Training Authorities are not
fulfilling their mandate, have outlived their useful lives, and are sitting on
a substantial amount of money lying unused in their investment accounts.

Keeping the Skills Development
Levy in place while disbanding SETA’s in order to create a National Education
and Training Authority is a much NETA solution (sorry about that, just couldn’t
resist the pun). It then becomes a question of how to allocate the revenues
generated, and how best to employ the capital sum accruing from liquidated
reserves. This will require some serious critical and creative thinking.

As we cannot simply ignore the
existing pool of unemployed people, perhaps some of the money can be used to
establish “mature student” facilities within each municipality, where 25-40
year olds can be taught some skills that will provide them with
self-employment opportunities. I am fairly certain there is a pool of retired
people, or people who just want to give something back to the community, who
will be prepared to volunteer their skills as trainers, so the cost of staffing
these facilities will be minimal. The only issue this raises is that a level of
deregulation will be required.

Why not also set aside an amount
from the R13.85bn reserves for the purpose of making “Impact Investments” - low
or no interest repayable loans of typically no more than say R1,000 to
kick-start micro-businesses.

The balance of reserves could be
used to improve the existing TVET network of colleges, with revenues perhaps being
used to provide additional relief to university undergraduates, taking the form
of loans that are automatically converted to grants on passing each year’s
curriculum. Failure requires repayment of the loan.

Will these ideas work? Are they
creative? I am sure there are many people out there with lots of creative ideas
on how we might alleviate the unemployment tragedy, so let’s start putting them
on the table. Your start point is R13.85bn capital, and R14.1bn in annual
revenues. An absolute certainty is that we have to stop spinning on the
hamster-wheel of political inactivity and rhetoric, and jump onto the roller
coaster ride of rapid job creation, so let’s get working on it.

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About Me

After retiring early, I became involved with the local ratepayers association. This is where I gained first-hand experience of the damage that can be done by proportional representation politicians at local government level. I have become increasingly frustrated with the widening disconnection between party-dominated politicians and the people they (mis)represent.